Furnishings unit drags Dorel profit down 17.5%
By Michael J. Knell -- Furniture Today, August 6, 2006
Montreal — Consumer products giant Dorel Inds.' home furnishings segment continued to drag down second-quarter performance, as overall earnings dropped 17.5% and total revenues remained flat. The juvenile segment turned in a 12% sales gain.
Revenues in the latest quarter came to $435.9 million and net earnings were $17.9 million or 55 cents per share, compared with $21.7 million, or 66 cents per share in the year-ago quarter.
For the first half, Dorel's revenues were off 2.2% to $886.9 million and net income dropped 14% to $42.1 million, or $1.28 per share, from $49 million or $1.49 per share in last year's first six months.
Dorel reports in U.S. dollars.
"As anticipated, the quarter was disappointing," President and CEO Martin Schwartz told analysts in a conference call. "While juvenile posted solid revenue gains, particularly in the U.S., we are continuing to work through issues in ready-to-assemble furniture, and ... progress is being made at Ameriwood. Particle-board pricing has stabilized and price increases have been negotiated with major retailers, which are expected to take effect later in the third quarter."
Second-quarter revenues in the home furnishings segment dropped 8.9% to $120.1 million, while earnings from operations were down 24.2% to $4.7 million. In the six months, revenues slipped 8.5% to $253.8 million, and operating earnings plunged 45.3% to $9.3 million.
"Sales of ready-to-assemble furniture declined by $10.7 million from the second quarter of 2005, or 19%, due principally to lower sales to the mass-merchant channel," Schwartz said, adding that Ameriwood's futon sales in the quarter dropped 18%. He still expects futon sales for the year to exceed 2005's.
Cosco Home & Office and Dorel Asia, the company's importing arm, saw moderate revenue gains.
The most significant challenge in RTA remains particle-board prices, which at one point were 50% higher year-over-year, Schwartz said.
He said Ameriwood was successful in placing promotional back-to-college RTA furniture and futon products at major retailers and is working with several dealers to launch new storage and organization programs that are expected to ship in the fourth quarter.
Dorel saw sales slip in both Canada and the United States, its largest single market, in the quarter and first half, with slight increases in Europe and the rest of the world.
| Dorel Inds. | |||
|---|---|---|---|
| Owns Ameriwood, Charleswood, Cosco and Ridgewood | |||
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 6/30 | 2006 | 2005 | Change |
| (a) Includes licensing and commission income of $6.5 million in the 2006 quarter, $5.2 million in the 2005 quarter, $12.6 million in the 2006 half and $11.5 million in the 2005 half. |
|||
| Revenues (a) | $435,914,000 | $435,375,000 | 0.1% |
| Operating income | 36,489,000 | 45,165,000 | (19.2%) |
| Net income | 17,936,000 | 21,745,000 | (17.5%) |
| Earnings per share | 0.55 | 0.66 | (16.7%) |
| 6 months ended 6/30 | 2006 | 2005 | Change |
| Revenues (a) | $886,938,000 | $907,278,000 | (2.2%) |
| Operating income | 85,147,000 | 98,585,000 | (13.6%) |
| Net income | 42,117,000 | 48,950,000 | (14.0%) |
| Earnings per share | 1.28 | 1.49 | (14.1%) |
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